Emission allowances

Allocation of allowances to aircraft operators is based on uniformity, focusing on the level playing field for aircraft operators and the centralization of the EU institutions. Common emission values are for the EU as a whole and not for each member state. Allocation to aircraft operators is coordinated in all member states, and is based on the so-called benchmark that takes into account the emissions per tonne-km. Thus, aircraft operators that operate fuel efficient aircraft are preferred at the expense of those emitting proportionally more carbon dioxide into the atmosphere in their operations. The largest share of allowances in the system will be allocated free of charge to aircraft operators, or 85%, while 15% will be auctioned. Allowances have already been allocated to aircraft operators but before the allocation, extensive information was collected on historical emissions and the share of individual aircraft operators in that. Because of this, monitoring of emissions from aircraft activities began on January 1, 2010 in accordance with the monitoring plans aircraft operators had submitted to the competent authorities in each member state. 

Allocation of allowances 

On the 9th of December 2011 the minister of Environment set out Regulation No. 1131/2011 on the allocation of allowances free of charge, and it is consistent with the decision of the Joint EEA Committee from October 21st 2011. With the Regulation, one benchmark has been decided for phase two in 2012 and another one for phase three in 2013-2020. In phase three, aircraft operators receive 0.6422 allowances per 1,000 tonne-kilometres flown. 

Nine aircraft operators applied for free allowances to the Environmental Agency of Iceland. Based on the benchmark and verified information from aircraft operators on the number of tonne kilometers in their operations, the Environmental Agency of Iceland calculated their free allowances for phase two in 2012 and for phase three in 2013-2020. 

Following the decision of the EEA Joint Committee No.62/2014 amending Annex XX (Environment) to the EEA Agreement, and that Regulation amending Directive 2003/87/EC will be incorporated into the EEA Agreement, the scope of the EU-ETS has been reduced, and no action to be taken against aircraft operators in respect of: 

  • All emissions from air transport to and from airports, that are located in countries outside the European Economic Area (EEA), in each calendar year from January 1st 2013 to December 31st 2016, 
  • All emissions from air transport between airport, which is located on the outermost region within the meaning of Article 349 of the Treaty on the Functioning of the European Union, and an airport, which is located in a different area of the EEA, on each calendar year from January 1st 2013 to December 31st 2016, 
  • Surrendering of allowances corresponding to verified emissions for 2013, from flights between airports that are located in the EEA, which occur no later than April 30th 2015 instead of April 30th 2014, and verified emissions for those flights reported no later than March 31st 2015 instead of March 31st 2014. 

Therefore, aircraft operators that have received free allowances will receive fewer allowances since they are allocated in proportion to the reduction of obligations in surrendering of allowances in the period 2013-2016.

With reference to the above provisions, the Environmental Agency of Iceland has re-calculated the allocation of allowances for aviation in the EU- ETS for the period 2013-2016 in accordance with Regulation 1131/2011 on the allocation of free allowances to aircraft operators. 

Aircraft operators that have been allocated free allowances but are exempted from the EU-ETS until 2020 based on a temporary exemption for flights performed by non-commercial aircraft operators with total annual emissions lower than 1 000 tons CO2 per year, will only be allocated the allowances but they will not be transferred to their account in the Union Registry. If, in the future, for a certain year or permanently, an aircraft operator will increase its activity above the exemption, they will be included again and receive the allocated allowances. 

The following aircraft operators have been allocated and received free allowances: 

CRCOAircraft operator Allocation 2012Annual allocation 2013-2016Total allocation 2013-2016
3176FLUGFELAG ISLANDS10.4908.01132.044

The following aircraft operators have been allocated allowances but they have not been transferred since they are under an exemption: 

CRCOAircraft operator Allocation 2012Annual allocation 2013-2016Total allocation 2013-2016
28475Silk Way Airlines68.550416
30279Papier Mettler6661244
35130Switchback Argentina, LLC100
35682Investair 300, LLC314
f10895Cooper Industries428
f12111Supervalu Inc.16416

Special Reserve for new entrants and fast growing airlines 

New aircraft operators in the EU Emissions Trading System (EU ETS) can apply for free allowance from the ETS. In the period 2013-2020, the total quantity of allowances to be allocated for the aviation sector is 95% of the EEA-wide historical aviation emissions, and from that 82% of the allowances are granted for free to aircraft operators, 15% are assigned by auctioning and 3% remain in a special reserve for later distribution to fast growing airlines and new entrants into the market. In the period 2013-2020 the allocation from the reserve is from the 1st of January 2017 to the 31st of December 2020. New entrants are:

  • Aircraft operators, who start flight operations mentioned in Annex II after monitoring year during current period, see Art. 18 (3) which was the year 2010, or
  • Aircraft operators who increase the number of tonne- kilometres in their activity by an average of more than 18% per year between 2010 and 2014.

Aircraft operators that wished for allocation from the Special Reserve had to hand in their monitoring plan for tonne kilometers in August 2013 and will hand in verified tonne kilometer report before June 30th 2015.

The Environmental Agency will send the applications (tonne-kilometre reports with reasons) to the EU before December 31st 2015. The decision on who was assigned allowances will be published on September 30th 2016 and the first allocation will take place in 2017.

Further information on allocation of free allowances can be found in art. 18-20 in the Icelandic Law on Climate Change.

Frequently asked questions on the Special Reserve.